ESTEE LAUDER COMPANIES INC

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significant change in our employee population or our employee compensation arrangements that we reasonably believe would result in a significant change to the Company’s pay ratio disclosure for fiscal 2024, in accordance with SEC rules, we substituted a new median employee for fiscal 2024 with substantially similar fiscal 2023 compensation as our original median employee using the same consistently applied compensation measure as was previously used to calculate the above-referenced fiscal 2024 pay ratio. When the median employee works outside the U.S., the Company uses a fiscal year 12-month average exchange rate to convert the employee’s total annual compensation for the relevant fiscal year to U.S. dollars.

To identify the median annual total compensation of our employees, we used the methodology and material assumptions, adjustments, and estimates noted below.

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We selected April 1, 2023, which is within the last three months of fiscal 2023, as the date upon which we would identify the median employee. We determined that, as of such date, our employee population consisted of approximately 60,000 individuals working at the Company and consolidated subsidiaries. This was comprised of full-time, part-time, and temporary employees, with approximately 70% working outside the United States.

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Our employee population for purposes of the pay ratio analysis, after taking into consideration the adjustment permitted by SEC rules (as described below), consisted of approximately 57,000 individuals. Of these employees, approximately 70% were employed on a full-time basis, with the remainder (approximately 30%) employed on a part-time or temporary basis. Individuals working on a part-time or temporary basis include on-call and freelance employees. Under the de minimis exemption provided in the SEC rules, we excluded a total of 2,838 employees from certain countries. The specific number of employees excluded from each country was: Colombia (156), India (592), Kazakhstan (79), Malaysia (984), Philippines (207), Turkey (632), Ukraine (55), and Vietnam (133). The excluded employees did not exceed 5% of our total U.S. and non-U.S. employee population.

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To identify the median employee, we used base salary/hourly wages paid as the consistently applied compensation measure for the 12-month period beginning April 1, 2022 and ending on March 31, 2023. We used the 12-month average exchange rate to convert each non-U.S. employee’s total annual compensation to U.S. dollars to identify our median employee. We annualized compensation for full-time and part-time employees who were hired during this time frame. Using this methodology, we identified our median employee, who works at a retail store outside the U.S.

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The pay ratio included above is a reasonable estimate calculated in a manner consistent with the SEC rules. Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates, and assumptions, our Company’s pay ratio may not be comparable to the pay ratio reported by other companies.

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Pay Versus Performance

Below is disclosure relating to the compensation of our Named Executive Officers (“NEOs”) for the last four fiscal years calculated in accordance with Item 402(v) of Regulation S-K under the Securities Exchange Act of 1934 (“Item 402(v)”). Item 402(v) requires disclosure of ”compensation actually paid” ​(referred to herein as “Compensation Actually Paid” or the “CAP Amounts”) for the Principal Executive Officer (“PEO”) and the Non-PEO NEOs.

The Compensation Committee and the Stock Plan Subcommittee do not use the CAP Amounts when making compensation decisions. For a discussion of how our Company seeks to align pay with performance when making compensation decisions, please review the “Compensation Discussion and Analysis – Elements of Compensation.”

The following tables and related disclosures provide information concerning our PEO and Non-PEO NEOs with regard to (i) the Summary Compensation Table (“SCT”) Total and (ii) the CAP Amounts.

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(1)

The PEO and Non-PEO NEOs included in the above compensation columns reflect the following:

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(2)

The following table describes the adjustments, each of which is required by Item 402(v), to calculate the CAP Amounts shown in the table above.

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The equity valuation methodology was kept consistent with those used at the time of grant, with assumptions updated to reflect information available at the time of each valuation, including payout estimates. Instead of using the target payout amounts for PSUs, we used the total expected payout based on estimates of performance in future years. The price of our Class A Common Stock used for fiscal 2024 was $106.40 (the closing stock price on June 28, 2024, the last trading day of fiscal 2024).

(3)

The peer group used in this disclosure is the S&P 500 Consumer Staples Index, which is the same peer group used in Part II, Item 5 of our Form 10-K for each of the fiscal years shown.

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(4)

Please refer to Appendix A of this Proxy Statement for reconciliation of, and other information about, this non-GAAP measure.

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The following table lists the financial performance metrics that, in our assessment, represent the most important financial performance measures we use to link compensation actually paid to our NEOs for the most recently completed fiscal year.

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Please refer to Appendix A of this Proxy Statement for information about each of these non-GAAP measures.

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The following charts show graphically the relationships over the past four years of the CAP Amounts for our PEO and average Non-PEO NEOs as compared to changes in our TSR, Peer Group TSR, Net Earnings, and Adjusted Diluted EPS (% change), as well as the relationship between TSR and Peer Group TSR.

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